Jones Company issued bonds with a $170,000 face value on January 1, Year 1. The five-year term bonds were issued at 98 and had a 7.00% stated rate of interest that is payable in cash on December 31^st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information:The total amount of liabilities shown on Jones's December 31, Year 2 balance sheet would be:

Question

Quizplus · Accepted Answer

To find the total amount of liabilities shown on Jones's December 31, Year 2 balance sheet, we need to calculate how much of the bond discount has been amortized as of that date.

The total bond discount is $170,000 x (100% - 98%) = $3,400.

The annual amortization of the bond discount is $3,400 / 5 years = $680 per year.

By December 31, Year 2, two years will have passed since the bonds were issued, so the total amount of bond discount that has been amortized is:

$680 x 2 years = $1,360

Therefore, the carrying value of the bonds on December 31, Year 2 is:

Face value - unamortized discount = $170,000 - $1,360 = $168,640

So, the total amount of liabilities shown on Jones's December 31, Year 2 balance sheet would be:

Bonds payable = $170,000
Less: Unamortized discount = $1,360
Carrying value of bonds payable = $168,640

Other liabilities are not mentioned in the question.

Jones Company Issued Bonds with a $170,000 Face Value on January